Saudi oil production - Read Minister Al-Naimi's small print
Posted by Heading Out on October 19, 2010 - 10:43am
Yesterday the Saudi Arabian oil Minister, Ali Al-Naimi, commented that the days of easy oil are not over, and that there remain at least 88 billion barrels in the Saudi oilfield of Ghawar, let alone the rest of the fields in that country. Well before that sends you out to buy a fleet of Hummers, you might want to take a wee bit closer look at some of the other things that he said, or did not say. For the future is not quite as rosy as his remarks might, at first, make you think.
Let’s start with the “days of easy oil are not over.” That is a somewhat egregious remark. It is relatively easy for the Kingdom of Saudi Arabia (KSA) to brag that it is still not that expensive to produce oil. Given the size and extensive development of their fields that is, at present, still to a large extent true for them. But Aramco have carried out extensive research into modeling their fields and developing technologies such as maximum reservoir contact (MRC) on order to get the maximum amount of oil out of their fields. (And I’ll get around to that in a minute). But the KSA only produce a fraction of the increasing amount of oil that the world needs every day. And it is the cost of the oil at the margin (that which balances oil supply with need) that to a much greater degree controls the price.
At the moment the countries that make up OPEC can increase production at need, beyond the current levels of demand. As long as they can do this they can impose controls on the price. This is because the rest of the world is producing just about as fast as it can and there is some doubt, despite some rosy predictions, that they will be able to raise levels above those currently produced. If the price falls too much, then some of the more marginal oil, that is more expensive to produce, might drop off the market. At that point, if OPEC cannot make up the difference, and I would argue that beyond a certain relatively low volume (4 mbd) it no longer can, then prices will rise again. There is an effective lower bound on price now, significantly higher than OPEC costs.
Last week at the ASPO-USA Conference Michael Klare commented on the amount of money that this will bring to the nations that produce oil much cheaper than the global price (which KSA is happy to keep at around $80 bbl) but to keep that price it relies on the make-up oil that is not “easy” at all. This includes oil sand and deepwater production.
Now let me turn to some of the more worrisome part of what he said. Until recently it has been assumed that KSA was going to raise production to levels of 12.5 mbd as part of the balancing act to match declines in other fields and meet supply. (And some time before that there was talk of Saudi production levels of up to 15 mbd). However the KSA has a problem. To get the maximum recovery from their fields they have to control the interface between the waterflood and the oil., and move it relatively slowly and evenly through the reservoir. They are quite good at this, and likely getting better. But it means that they produce the oil at, for them, relatively slow rates. And they are slowing these down a bit. As a result the maximum that they are now talking about is 12 mbd. Which means if you are looking at the global balance over the next few years you have just had to take an eraser and remove 500,000 bd from the available supply. Note that this is not quite 50% more than current production.
Why is this? Well that comes to another part of the remarks that the Oil Minister made. The next major plan for production of oil is the development of the Manifa oilfield. It was, at one time, scheduled to produce a million bd, but this is now dropped to 900,000 bd. But there is a greater concern.
Manifa is a heavy, sour (i.e. high sulfur), vanadium contaminated deposit. It requires a special refinery to process the oil, and these don’t exist. The KSA has had plans in the works for some time to build two refineries in the Kingdom that will refine this oil. There have, however, been delays in construction. It appears that these are getting worse, or, for other reasons, have been further postponed. Without the refineries the ability to produce the oil is meaningless. The original date at which these facilities were supposed to be on line was within the next two. It is now, apparently, been moved to 2024. Presuming that this is not a misprint (since the last target was 2013) it means that KSA has changed its strategy and is not looking to ever produce above the 12 mbd current target as we move into the future.
Naimi said the kingdom has sufficient production capacity at 12 million barrels per day (bpd) and has a strategy of preserving its resources and developing new sources of energy.
"We have the production capacity and we don't have to deplete our reservoirs as fast as someone who's just there for investment...so we don't really have to pull our reservoirs as hard as we should," Naimi said.
With their internal consumption continuing to rise, and with increasing sales to China, the amount of that oil which is going to be available to the West is going to go down.
Whether and when they will get to 12 mbd now becomes more of a question. Given current levels, and the income that they are getting from them, it is hard for me to see production rising to even 11 mbd. (subtracting the volume from Manifa). And if world consumption is rising at around 1.5 mbd per year, for the sake of discussion, then we are going to see an imbalance between production and supply needs, in just about 2 years.
Given that this was the message from the ASPO_USA conference, it is interesting to see the Saudi Oil Minister so rapidly confirm it.
So I’m afraid the difference between the headline of his remarks and the small print of his text are enough apart to be disturbing.
And I must apologize in that this was written on the train from Vienna to Graz and I don't have access to all my usual references, which I would insert.
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An oil exporting country such as Saudi Arabia has a trade surplus and gov't owned oil companies. A question rarely discussed is why should such a country trade oil in the ground for paper money in a bank. If I was the king of such a country, I would rather keep my oil in the ground as a storage of value, given the outlook for the world economy. I would produce & export just enough to keep my country's economy in balance. If global supplies are tight, losing market share shouldn't be an issue.
The Norwegian state for instance has a significant ownership in the country's oil reserves. They have exported oil for decades and invested the profits in the sovereigh wealth fund "statens pensjonsfon utland" (="The government's foreign pension fund") which I believe is one of the world's larges sovereign wealth funds. Roughly half of it is treasuries and the other half is stocks. The future value of these assets could be in jeopardy if the recession deepens... Oil in the ground on the other hand will most certainly retain its value.
/Mats Lindqvist
Lund, Sweden
Hi Matt,
If I were a Swedish citizen, I would lobby for the oil to be left in the ground, for the very reasons you give.
But in the larger game of power and politics, the House of Saud owes its existence in its current form to a defacto deal cut with the West-we keep them in power and they keep us in oil;without the ever present Western political and military presence, they wouldn't last six months probably.
Now it looks as if they see the sands of fortune shifting and are beginning to hedge thier bets by cozying up to China a bit and refusing to "go steady" with us any longer.
Other things going on in the KSA. The House of Saud is reigning in their religious clerics and, from yesterday's drumbeat:
http://www.bloomberg.com/news/2010-10-17/saudi-king-s-battle-with-conser...
I can't help but wonder how this all ties in. Perhaps the Saudis are preparing for the day when the US isn't providing as much "stablizing" influence. Perhaps they understand that the Chinese have less tolerance for Islamic law interfering with their commerce. Perhaps the King is just getting old and grumpy.
Situations such as the one prevailing in Saudi Arabia are inherently unstable;it may well be that you are correct about the Chinese influence and impatience with religious intereference;but the religious leaders are another leg of the triangle supporting the House of Saud;thier influence has in the past been essential to the House and defacto deals were cut to support them so long as they supported the royal family;but now they are pushing for more power and influence, and an internal power struggle is underway.
If anybody overthrows the House from the inside, it will be the clerics.
Well, it will not be the clerics directly. It will be young unemployed men who the clerics have been preaching to for many years.
The KSA needs to watch the discipline of their military & police. If it gets too many fundamentalists, they could turn against the Monarchy.
BTW, there is a nice film running at IMAX science theatres called 'Arabia'. It has some nice history in it . . . but it is also clearly a propaganda piece for KSA promoting its less fundamentalist side. I hope that less fundamentalist side prevails.
What ? Though to be more "down to earth business minded" than the Chinese, they don't care at all about Islamic law, and in what sense that interfere with the commerce anyway ?
"in what sense that interfere with the commerce anyway ?"
Interference:
Not sure what you mean by that ...
The US has been in bed with Saudi Arabia for quite a long time, since 1945 and Roosevelt meeting with king Fahd (started in 1939 in fact), what the US needs is a stable Saudi Arabia and influence in the region, what Saudi Arabia needs is security and weapons to keep its neighbors in place. For the stability part, a monarchy under islamic rule is perfectly working for the US, and the partnership has been used in many different ways, for instance in the 80ies under Reagan the US pushed Saudi Arabia to increase production in order to starve the USSR from its main revenue, the Saudis did and it worked. Now that some Bin Laden or others got pissed about that (also using an islamic flag) is another point, however it doesn't change the fact of Saudi Arabia being a key US partner in the region. Should the Chinese "take over" the partnership, goal would be the same, having a "stable" partner government whatever that is.
"Not sure what you mean by that ..."
I mean that the Chinese want reassurance that, when choosing their critcal energy trading partners, they won't have to deal with a radical/religious fringe blowing up their citizens and flying planes into their centers of commerce. To believe this hasn't been discussed is naive. Something like " reign in your clerics and we can have a more productive trading relationship because we don't want to spend trillions securing (subsidizing) our energy sources the way the US has." Would you want to invest in another country's energy sources knowing that some fundamentalists are determined to blow them up and "interfere" in your business?
That's what I mean by that. It was a simple point.
Yeah, would say you are the naive one here, real politics is real politics, diplomacy is diplomacy (and business is business), Saudi Arabia as Iraq and Koweit are more or less artificial countries (a bit less for Saudi Arabia) defined (by the West) further to the Ottoman empire disparition, and the point here is not really "when choosing their critical energy trading partners", it is managing to get partnership with countries that actually HAVE energy, and where is the energy, you don't chose it. If you look at Iran : It was under British rule for the oil up to 53, then the CIA/MI6 ousted Mossadegh further to his move to nationalize the oil (and further to the Brit governmt threatening to invade Iran and putting an embargo on Iran oil import), put the Shah in place which moved the influence more towards the US, and then Khomeiny 79, so what ?
Have you seen Bush hand in hand with Abdallah ? Again when the US / Saudi Arabia became partner, having a strong autocratic govermnent in KSA was of course perfectly Ok for the US, and if it had been with the Chinese woud have been the same (happening for China in some African countries right now).
On " securing (subsidizing) our energy sources the way the US has"
Sure the US spends a lot on its Army, but it also sells quite a bit of military hardware (and to KSA in paticular), and what about KSA increasing its prod in the eighties ? Isn't that subsadizing the US in general and in its cold war effort in particular ?
On "Would you want to invest in another country's energy sources knowing that some fundamentalists are determined to blow them up and "interfere" in your business"
Don't think this appeared as a threat in the 50ies 70ies or even 80ies, you take what appears the most realistic and stable at the time.
And the real solution here, would have been for the US to get out of oil or at least consume much less, ie put a reasonable tax on it (protectionism from a KSA perspective), they didn't and are the only OECD country that didn't, why ?
"And the real solution here, would have been for the US to get out of oil or at least consume much less, ie put a reasonable tax on it (protectionism from a KSA perspective), they didn't and are the only OECD country that didn't, why ?"
Because the American electorate considers itself special, entitled, (they've been taught this from birth), and TPTB continue to profit greatly from this, ensuring that this myth continues until it can't. The religion of growth is being proven false, of course. That's why I'm here.
Ghung, the attack against the US by Saudis wasn't related to oil production in Saudi Arabia. As stated by CIA expert Michael Scheuer, and as disclosed by Osama bin Laden, it was a response to US interference in their affairs, which he listed as:
1. US support for tyrants in the Arab world
2. US bombing and abuse of its power against Iraq
3. US assistance for the state of Israel
The Chinese would definitely not have to worry about two out of these three if they become the Saudi regime's patron. Furthermore, they may see it as a positive to have the monarchy replaced by a Taliban-like regime - as long as it produces the oil China needs.
But the USA has a much more complicated game in the Middle East and Central Asia, and the core issue is item number three above. USA policy assisting Israel is definitely contrary to US interests. It happens because there is a very strong pro-Israel lobby in the US.
Now that my theory has been
debunkedchallenged by those with abettermore complicated view of this situation, and being a patient man, I'll wait and see how things play out. We humans seem to enjoy embelishing the reasons for our actions with complex rationalizations, though my sense is that these ("extremists") are just mad little dogs who will attack the Big Dog on the block, whomever that may be.Just another set of posts to add to my permalink list.
Ghung, it's not complex rationalization on their part. The Israelis invaded their territory, forced Palestinians out. The US helps the Israelis by using the UN security council veto, providing weapons as needed, and providing a economic aid. Therefore they feel offended and they see the USA as a root cause for the misery inflicted on Palestinians.
The same applies to Iraq, the pre-2003 US attitude was to strangle the Iraqis, bomb them once in a while, and so on. And they remembered very well that Bush Sr had encouraged a rebellion against Saddam, only to back off and leave them to get massacred. They also realized the US game had been to encourage both Iranians and Iraqis to kill each other as much as possible. This of course creates resentment.
These are two issues which drive those fighting for Osama bin Laden. What Osama the man thinks isn't really that important, he knows how to push the right buttons. And he is doing a very good job. Meanwhile US foreign policy flounders because these extremists are indeed following a very simple drive, they are convinced they are avenging their brothers. And that can convince anybody to do a lot of fighting. Which is one reason why the US is never going to win in the Middle East. We're going to get kicked out of Iraq eventually, we'll get kicked out of Afghanistan, and all of this will do nothing for most of us, but it will definitely do what the Israel lobby wants, it will generate profits for weapons manufacturers, and it will cover political generals like Petraoeous with the glory they crave. But it's all for nothing.
"And that can convince anybody to do a lot of fighting. Which is one reason why the US is never going to win in the Middle East. We're going to get kicked out of Iraq eventually, we'll get kicked out of Afghanistan...."
....and this culture of anger, of fatwas, will take a generation or two (at least) to resolve itself. The Chinese know this (which was my original point).
There's so much wrong with this sentence alone, it's hard to find a place to begin.
This shreds the very popular leftist political narrative, but that's not the fault of the facts.
Thanks for that EP. I wasn't going there.
There is no oil in Sweden Oldfarmer, it's all in Norway (almost)
"Today the Saudi royal family numbers an estimated 5000 males, with 30 to 40 more born every month, each granted a half million dollar annual stipend at birth to get started in the world"
That's from a 2003 article : http://www.thirdworldtraveler.com/Zepezauer_Mark/SaudiArabia_Boomerang.html. I've read elsewhere that the total number of family members on the royal dole was more like 20,000, with an exponential growth rate likely to hit 40,000 by 2020 or so, if I recall right. That's not such an easy budget to balance.
40K princes at $0.5 M annually is $20 G annually. At $100/barrel in 2020, that would be 200 M barrels annually. Doesn't seem to be a problem.
...yes, just looking at the public numbers of course ends seem to be meeting quite well over there, but (as should be expected) its not nearly so simple.
"Saudi Arabia - The Coming Storm" is one book (though a bit dated) which can be browsed on Google books for some detail: http://books.google.com/books?printsec=frontcover&vid=ISBN1563243946&vid...
Not that I disagree, but the principle question is "Oil is like gold, but for how long is it like gold?"
There's a shelf life on the value of this precious commodity. Maybe the thinking is once the oil has no value there is nothing worth living for - who knows? This is a perennial problem throughout sciences and quasi-sciences (ahem.. cough.. economics). How to optimize a process or given resource. Some might call it crystal ball gazing and maybe they aren't too far off the truth.
(Hey! I did Econ for a minor, so I get a little slack in the comments department)
We are all gazing out on the horizon of Man's future and only see the land and sky and sun. Can you tell me any different?
There's a limited time that the stuff will have burning as a primary use but there's a much longer period for which we'll need long-chain hydrocarbons, and I expect that plastics (as we know them now) are only the tip of the iceberg. I think it's a pity that the best idea to use this stuff that we've had so far is "make fire".
I did econ, too. One of the best decisions of my life (learn econ but don't become an economist).
If you want long-chain hydrocarbons, ethanol is easily dehydrated to ethylene and then polymerized. Dow Chemical is just one company looking into it.
I'm no chemist, but there seems to be a lot of interest in syntheses starting from 5-hydroxymethylfuran (5-HMF). This is being produced from 6-carbon sugars.
A short trip down memory lane:
http://www.independent.co.uk/news/business/news/opec-studying-plan-to-bo...
Opec studying plan to boost oil price band by a third (April, 2004)
Saudi Arabia followed through on their promise to try to restrain oil prices, as they significantly increased their net oil exports in the 2002 to 2005 time frame, but in early 2006 they announced that they were cutting back on their net exports, due to a lack of demand, "Even for their light/sweet oil," as annual oil prices went from $57 in 2005 to $100 in 2008.
At the end of 2010, it appears that we will have seen five straight years of Saudi annual production and net exports being below their 2005 rate, while it appears that four of the five years will show year over year increases in oil prices (and it appears that all five years will exceed the $57 level that we saw in 2005). We have seen similar patterns like this in post-peak regions such as Texas and the North Sea, where their initial production declines corresponded to sharply rising oil prices--in contrast to large increases in production leading up to the production peaks.
My analysis of Saudi net oil exports versus oil prices in the 2002 to 2008 time frame:
IMO, a good deal of what is described as "Excess Capacity" worldwide consists of what Matt Simmons described as "Oil stained brine."
The EIA has Saudi 2009 exports at 7333 million barrels. Here's their picture;
http://www.eia.doe.gov/country/country_energy_data.cfm?fips=SA
It sure looks like KSA is stuck at around 8m bd. I still go back to how many OPEC countries, including the Saudis, all of a sudden had a great deal more reserves. It would seem logical that KSA might only be able to increase production to balance prices for a short period. They seem intent with leaving some for the future, which I don't blame them for. But even if they could increase production to 12m bd, what difference is it going to make with the worldwide decline rates at 4 million. I agree with the assessment that the Saudis are at best fudging, but oil production worldwide has been stuck at 75 million since late 2004 and will soon fall off a cliff. Ernest
So if Ghawar actually turns out even a hundred billion barrels, eventually, and we are consuming a billion barrels very roughly every ten days or so, the by far the biggest and cheapest to produce super giant ever found.............wouldn't even outlast the warranty on a cheap car.
This sort of makes the reassurances we have heard so long from the bau crowd ring a little hollow doesn't it?
My wife says I'm argumentative so here goes:
In 2004 Matt Simmons challenged the Saudi figures and Saudi Aramco responded by saying that they could maintain level production until 2042 at 10 mbpd or until 2033 at 12 mbpd. One has to ask: How?
Ref: http://csis.org/files/media/csis/events/040224_baqiandsaleri.pdf -- slides 23 and 24)
Cantarell's production increased using Nitrogen and CO2 is supposed to do likewise for depleted wells. We saw Cantarell's production go up from 1.6 mbpd to 2.1 mbpd over about a 5 year period before declining.
What would keep the Saudis from doing the same thing to Ghawar and having similar results? Would they be able to take the emissions from their refineries and pump them back into the ground to free up additional resources?
BTW I respected Matt Simmons a great deal and if you listen to his report about a large area of oil existing away from Deep Water Horizons, his report is based on data he received from a survey done by the research vessel Thomas Jefferson.
ref: http://www.infowars.com/matt-simmons-believes-oil-covers-40-of-gulf-bene...
The MSM may have tried to paint him as being "off" but to the end he based his opinions on the data he collected and analyzed.
Peter - there a big difference in the reservoir drive mechanics of the two fields. Cantarell is primarially a pressure depletion drive. The injected N2 helped maintain the pressure and kept the oil flowing. One reason that Canatrell went into steep decline is that the N2 cap expanded down to the perforations of many wells and they were forced to shut those wells down in order to maintain the reservoir pressure. Ghawar is primarially a water drive reservoir and has already benefited from decades of water injection to increase URR. And production declines in such systems tend to be a good bit slower than fields like Cantarell. There could be portions of Ghawar that could benefit from some form of gas injection but I doubt anywhere near to the degree that Cantarell benefited.
Plus the Saudis have better reservoir management, and the mobility ratio is probably a lot better for the Saudi field. What I read above tells me they're focused on slowing down the flood front. That should give them a really cool displacement efficiency.
Are they piloting polymers or CO2 floods?
Peter, one can base opinions on data one collects and analyses. And the opinion can be really way off. I'm not much of a peak oil expert, but I did follow what he was saying earlier this year, and most of it was pretty crazy. I think he was a pitchman, and was setting up to write a book about the BP oil spill. He wanted to get his name in the media, and the media just looooved the material he was spreading.
The last few months I concluded nothing I watch on the news is reliable, given their coverage of the Macondo spill. I have always felt about 70 % of it was wrong, but now I'm starting to think everything is off. Fox is the worst by far, its lies and distortions are Orwellian, but the others aren't giving us a truthful account either.
Indeed. My first thought at reading this article was "88 billion barrels?...oh dear...is that all?"
Then how do you explain this:
13/8/2010
Saudi Arabia lost production share to Russia
http://www.crudeoilpeak.com/?p=1800
Since mid 2008, when Saudi Arabia could not supply sufficient quantities to keep oil prices down (see Westexas' post above) SA may have become a negative swing producer that is they can reduce production without their budget falling over, but they can't produce much more over a longer period. Iran, by contrast, can't swing in either direction because they can't afford to lose oil revenue and they are in decline.
3/7/2010
Iran needs $130 oil to balance budget
IEA: Iran's crude oil production to decline by 700 Kb/d by 2015
http://www.crudeoilpeak.com/?p=1669
As for Saudi exports:
31/7/2010
Saudi Aramco's crude oil exports peaked in 2005
http://www.crudeoilpeak.com/?p=1738
And we remember this:
12/7/2010
Saudi King ordered oil exploration to cease. But will it matter?
http://www.crudeoilpeak.com/?p=1710
This is news indeed. I think Manifa will be ready by 2013 to 2015 but if the refinery that can handle vanadium contaminated oil will not be ready until 2024 then that explains why the oil from Manifa will not be produced before then. The vanadium contamination was the reason the field was never developed before, no refinery in the world can handle it.
I found this line from the article interesting also:
I think that means they have produced 70 percent of the available oil in some fields but it is not clear. Anyway we already knew that Abqaiq was depleted at least by 70 percent but they use the plural here, "fields". That means that other fields are 70 percent depleted.
But let's get to the motive! Why did Minister Ali Al-Naimi feel it necessary to assure the world that they have plenty of "cheap oil"? Saudi, and other Middle East nations, have feared for years that the world will develop "other sources" of liquid energy and leave them with a lot of worthless goo in the ground. Most of us realize this is nothing but paranoia, that a liquid fuel as cheap, efficient and abundant as liquid petroleum will never be developed. But the Saudis fear it will nevertheless.
Anyway that is why they keep increasing their "proven reserves" and keep assuring us that they have plenty of oil if only the demand is there.
Ron P.
I'm wondering about the cancellation of those refineries which could have handled the contaminated heavy oil from Manifa... It would be logical if say for example the Chinese made a very long-term deal to take the stuff raw (likely at a VERY favourable long-term contract price). Then if you were in charge of such decisions in the Chinese hierarchy, it would make a lot more sense to build the required refineries inside China than to pay to have them built in S. Arabia. The only downside risk to that deal for the Chinese is the slight possibility their domestic demand wouldn't meet the output supply of the new refineries, but if they were build on the seacoast, any excess output could be re-exported at a fair price.
Seems logical. So my SWAG would be that the cancellation of the refineries will have little effect on the development of Manifa. Interesting to watch.
That is scary and very credible. Imagine: China then takes the role of KSA, they have full control of that oil. At any price no one gets the oil except from the Chinese.
At a rough guess, people in a position to know (maybe in Saudi, maybe in the US) know pretty well what can be pumped at maximum rate, and how much remains in storage tankers. They also know what the worldwide demand is, and where its predicted to go over the next few months. Put those on the graph of ineleastic demand and you get out a prediction of where oil prices will be going. Maybe someone wants to preemptively say oil prices shooting up are not their fault?
That or someone is going to bomb Iran.
According to this analysis, Ghawar had between 103 and 94 billion barrels remaining in 2006. Assuming production of 5 mmbpd gives 7.3 billion barrels produced since then suggesting 96 to 87 billion barrels remaining now. Only a fraction of that producible.
http://europe.theoildrum.com/node/2507
So Al-Naimi may be spot on. Consistent with the guarded language used throughout the article.
Yep, 88billion in the ground is very different to 88billion in barrels. Plus there is the question of rate. We know the north end of Ghawar was free flowing and sweet. We know the south wasn't, and that it was developed to 1Mbpd production only recently.
Therefore its a fair bet that:
a) The recovery rate in the south will be less, meaning we will be luck to see 40billion of that on the surface.
b) The rate might well be closer to 1Mbpd than 5.5Mbpd, once the northern fields finally give up.
Here's my Saudi "forecast" made in 2007. Production since then has been lower owing to recession and increase in reserve capacity (9.7 mmbpd in 2009), but it does frame the 12 mmbpd ceiling implied by al Naimi quite well.
It would be interesting to enumerate the major oil producers in the world, and specify a model of what in terms of oil price is in their best interests as percieved by the powers that be.
Though the shape of the demand curve indeed does change in response to economic climate, a static approximation of the oil demand curve might be good enough to make predictions about how any given supply rate suits the various producers. Once their respective desires are known, careful consideration of the situation from each player's point of view might reveal obvious levers at each players disposal to effect those respective needs/desires, and so predict their behaviors in terms of newsworthy events / policies.
Couldn't 'best interest functions' of time, price, and supply rate, etc be tried for each player eg: Saudi Arabia with the specifics each player model openly debatable?
Couldn't expected actions for each supplier be found by inspection, and used to validate the various behavior models as new data ( the news ) becomes available?
To be the most useful, this would have to be transparent and open. NOT a black box. A modelpedia ( like wikipedia - updatable by the masses with discussion ) would be awesome. There ought to be room for many viewpoints on what the basic data is, and for different models to compete and link together. And their ought to be room for one to create / contribute one's own modular model component, such as writing the AI behind a given producer/player. Even if the speculators should be smarter than the actual players, it's likely that the actual players would adjust their behavior to match that of the most successful models of their behavior.
I'm not sure how all that would work. Still enumerating the players and making defensable guesses as to what their interests are and how they percieve their respective situations would be a useful first step.
Since actual data about the world ( about reserve size etc ) is often not reliable or is incomplete or secret, it might be guessed at. Various models entered by contributers, and also various guesses at data ( also contributed ) might be tried automatically, and then validated against actual news events. A model effective at predicting future events should emerge (evolve) that is a composite of the best contributed components. And because the components are created ( and explained ) by humans, they will be decipherable in terms of meaning.
Of course predictions of behavior ( news events ) would have to be questions emperically decidable as by a bookie to be used in the model, and there is no bookie here with incentive to expend the labor involved in determining the actual facts.
To be useful, the models need to be open source, which precludes setting it up ala DARPA's betting experiment. You can't have contributers making money by paying to create models that win money by being 'correct'. I don't know where you'd get the actual data from then.
Puff puff pass..
IMO, based on the Texas (1972-1982) and North Sea (1999-2009) case histories, I'm not sure that there is a price that could have brought their conventional crude oil production back to their peak rates.
I think it is a good idea. I would pass on predicting any financial info like prices though. I do a lot of analysis and the last thing I would ever consider is to model price behavior to that level of detail.
The shape of future oil production curves, and the price we pay for that oil, depends largely on how fast we develop alternate sources of reliable dispatchable inexpensive energy.
That is why the U.S. should be spending $100 billion per year on R&D of new energy sources. Most of that money should go toward Development, the expensive part of R&D. It would be far more beneficial to people all over the world than bailing out Wall Street bankers.
Unfortunately, the laws of physics are not changing no matter how much money we pour into R&D. We can spend the money and hope for discoveries that allow for more efficient energy harnessing but I don't think it that is a good direction to go. I think we should deploy the money as subsidies for current alternative energy systems on an energy per dollar basis that rewards the best systems. This will get systems deployed now and encourage development of more efficient systems.
The laws of physics let us do many things we've not yet done for reasons of lack of imagination or just plain politics. As examples, development of Molten Salt Reactors ceased in the USA because they were too simple yet unsuited for producing weapons materials, and the Integral Fast Reactor because a powerful faction of the Democrats was/is reflexively opposed to nuclear power.
A few billion dollars a year would get some designs into testing. Hundreds of billions would be wasted; testing needs to be done before production, and money doesn't make time go by faster. Ideally, what we'd get out of it is one or more modular designs (including the heat engine) suitable for factory production and also capable of supplying industrial process heat. This does not seem to be too much to ask.
Michael Dittmar likes to claim that we're running out of uranium, but a fast-spectrum reactor can take spent PWR fuel (SNF is about 95% uranium and ~1% Pu+Am+Cm) and burn it completely. At 0.8 tons/GW-yr, the 60,000 tons of SNF in the USA could run the electrical grid for about 150 years; the depleted uranium in inventory would multiply that figure by roughly 5, and there's at least as much thorium for MSRs.
EP, we are largely in agreement, but I take exception to this;
" money doesn't make time go by faster. "
When Japan attacked Pearl Harbor the nuclear cross sections for uranium were crudely known. Plutonium cross sections and physical properties were unknown, yet three years later we had two working bomb designs and a commercial scale production complex spread across the U.S. It was accomplished as follows.
1… Gather the best scientists and engineers in the country.
2… Assign the best project manager in the country. [Leslie Groves built the pentagon in 18 months, try that now]
3… Give them a checkbook on the U.S. treasury.
4… Give them full access to national resources, labs, test sites etc.
5… Eliminate all interference. No EPA, OSHA, congressional oversite, legal obstructionism, etc.
This methodology could have commercial size demonstration plants running in 5 years and the facilities to mass produce them.
Obviously this is not possible under business as usual conditions; it is the opposite of BAU. People can say that the country will not support this approach, but that does not prove that it is impossible. On the contrary, the Manhattan project and the Apollo project prove that it is possible.
Yes, I'm sure a Manhattan-urgency project could have the prototypes and plants in 5 years.
What they can't do is have that PLUS 5 years of operational experience with the first models to see what needs to be tweaked in less than 10 years.
Reservoir Management Practices in the Offshore Oil Fields of Saudi Arabia (2009)
Well, the Saudis not only want "to get maximum recovery" but also "to sustain production targets".
Before Americans get their balls together and set up something like a $2 tax a gallon on gas, any remarks from them sounds like pseudo witty airheads peasants babbling (even on a train from Vienna to wherever without any "homy" references)
This may come as a shock to you YvesT, but tax policy in the US is set by the government(s) not by energy correspondents. How do they set policy where you come from?
I thought the government was representing the people (including far from home on a train "energy correspondents" lacking some next to hand references, whatever that is), it isn't the case ? Energy correspondents are just plain impotent "witty" babblers ?
The US Government "represents" those who profit the most from their representation, same as most forms of government. Any witty babbling airhead peasant can figure that out. Why can't you, YvesT?
Well, yes it is, but the people largely think what they are told to think, ignore what they are told to ignore, hate who they are told to hate, etc, by the media-arm of the big corporate beast running the show here. If you are the representative of essentially sock-puppets, and still far smaller than the puppet-masters themselves, you pretty much do what you're told too.
Ali Al-Naimi touched upon energy security and alternate energy at the US-Saudi Business Opportunities Forum this past April.
Naive question:
Last time I visited a used car lot, the salesman told me that he had just the car I was looking for, but I'd better buy it right now because he had only one left and somebody else stopped by the other day. He did this to drive the price up, of course.
I realize marketing commodities is a little different than unique items, but still, how does it profit Saudi Arabia to tell everyone they've got boatloads of dirt-cheap oil?
It's definitely in their interest to describe themselves as a reliable source for the forseeable future, but every bit of uncertainty raises the price we're willing to pay them for their product.
Maybe the goal is to discourage exploration elsewhere, to limit their future competition? Doesn't make sense to me, though: that oil in Podunkistan *will* be discovered someday, and Saudi Arabia will have to compete with it now or later. Why not keep us nervous so the competition is at at the $120 a barrel price point rather than $80?
They may have decided that their customers can't afford $120 oil. It might be that we can't afford $80 oil.
Yes, two things and hit one of them.
1) They do worry about others discovering oil and driving the price down such that all their investments become stranded. The Saudis got burned in the early 80s when the North Sea and Purdue Bay came online and drove down prices. Their exports sagged. That event still drives their behavior today.
2) The do worry about electric cars or some other technology becoming popular so people will stop buying oil from them. I'm a supporter of EVs but I don't see that happening since EVs will remain expensive. But they want to make sure that oil remains below the price where EVs become practical. At $120/barrel, EVs will make a lot of economic sense. Actually, as Nick has pointed out, EVs make sense TODAY if you consider the entire lifetime operating cost of the cars. Driving cars on electricity is dirt cheap compared to gasoline.
"Actually, as Nick has pointed out, EVs make sense TODAY if you consider the entire lifetime operating cost of the cars. Driving cars on electricity is dirt cheap compared to gasoline."
I did a post a while back on a small EV van and an off-grid system to charge it (including a battery bank) for under $35k (not including PV system installation). I think that the EV specified had a range of 60 mi. If I had the funds I would do it today. The PV system could also function as a backup power system for ones home. Seems like a good investment to me.
The "Moose" I speced:
LOL
There's a relationship between a battery's cycle life vs. DOD depth of discharge
cycle life = 5000 at 10% DOD
cycle life = 1000 at 50% DOD
cycle life = 500 at 80% DOD
A common trick used by dishonest suppliers to fool the unsuspecting is to advertise BIG numbers for cycle life but they forget to tell you at what DOD.
//
example:
The nissan leaf has a 100 mile battery pack so using 1000 charge cycles at 50% discharge
1000cycles * 100mile * 0.5 = 50,000 mile operational life
That would last me 4 years and at $18,000 for the battery pack
18,000/4 = $4500 per year
That's 4 times what I pay in gasoline right now
The Moose uses AGM lead acid batteries, much cheaper and more robust cycling. While it doesn't have the range and pizzaz of the Leaf, it lists at less than $24K. Lead acid batteries cycle much better than the very expensive lithium batteries in more pricey EVs, especially in mobile applications. The math works much better for me.
Your numbers seem a bit sus to me. What's your source.
Lithium-Manganese Battery
Average life expectancy 500 cycles
Here is a different curve for A123 Batteries:
From Peter's link;
I'd rather drive a high efficiency diesel. I rented one in Spain last year and I got around 50 mpg, mixed city and highway driving. The batteries don't really convince me, and it still takes burning coal to charge the battery, so who's kidding whom about global warming?
From my experience of the last 5 years, your characterization of lead/acid batteries including AGMs is wrong. They are just pitiful compared to Lithium (LiFePO4) I'm on my second set of batteries for my GEM eS the first having lasted just 4 years (about 5500 mi) with an average DOD of less than 50% per trip and an average trip distance of about 6 miles. I replaced the OEM gels with AGMs but don't expect much more life. The AGMs have lower internal resistance than gels and are better in hilly country. If I had replaced the lead/acid with a (Chinese) LiFePO4 pack I would expect it to cost about the same per mile because of the much better cycle life. Next time around I will replace the Lead/acid pack with LiFePO4.
I've also electrified two trikes and two bikes and built a powered bike pusher trailer. I did go with LiFePO4 on the last bike which weighed less than 1/2 the equivalent Lead/acid pack (16 pounds vs 39). Also, LiFePO4 has a much better Peukert number than does lead/acid by a wide margin. For example a Li pack with a rating of 20ah will deliver close to that at 20 amps where a SLA lead/acid of 20ah will only give you about 13ah at 20 amps.
I suggest you study equlization/desulfating of lead acid batteries (or look for a different manufacturer). I understand the weight issue, but you seem to be hard on your batteries. I've had much better results. Li batteries are great, excepting their cost.
HankF - This EV conversion company would seem to agree with you - a good discussion and interesting charts about the relative merits of lead acid and lithium here;
http://www.canev.com/Swift.html
AS for the cycle life, the data sheet for CALB/SkyEnergy LiFePo4 batteries,
(http://lithiumstorage.com/index.php?main_page=page&id=20&zenid=eub6b1b2k...)
70%DOD - 3000 cycles
80% DOD -2000 cycles
Price works out to $422/kWh
AGM's are actually not much cheaper these days, when you try to keep them below 50% DOD, and a good deal heavier. OF course, you need more lead acids, just to carry the extra lead acids around.
The Nissan Leaf uses Lithium manganese batteries LiMn2O4 if I'm correct.
So the specs for LiFePo4 batteries are not relevant.
thanks for the link BTW
The specs are indeed irrelevant for the Leaf, but not for people doing their own aftermarket conversions.
There must be a good reason why they went Li-Mn instead of LiFePO4.
24kWh of these Sky Energy would be all of $10k, and that's at retail, not OEM pricing.
For the DIY conversions, where they often 12kWh, these would be all of $5k, and save about 800lbs, and lot of internal volume, compare to lead acids.
For the small EV's that makes a big difference.
If you haven't seen it before, this is worth checking out - the world record for driving an EV on one charge - 624 miles - in a home built EV conversion!
They did this in real world driving, up hill and down dale, in and out of traffic, over five days, averaging 25mph.
Their car has a 74kWh pack, so that is 8.4miles/kWh. If the Leaf got that it would have a range of 200 miles!
http://www.allcarselectric.com/blog/1047993_what-range-anxiety-daihatsu-....
The batteries alone would weight about 1700bs - the car itself, minus the original engine, would be about 1200lbs.
If it was carrying around just 24kWh of batteries (saving 1100bs), its miles/kWh would have been better still.
If we want cheap efficient, affordable electric cars, they just have to be small and lightweight - that's all.
Pictures please come on now, don't be shy.
do you have an account on here
http://www.evalbum.com/
Nissan Leaf's battery is warranteed for 100,000 miles, so either your figures are off, or a whole lot of heads are going to roll at Nissan in 5 years' time.
It cost Tesla $50,000 to engineer a battery pack that would last 100k mile.
Now Nissan says it can do the same at half the cost, however with a 100 mile range per charge.
Something smells fishy.
Batteries don't operate on Moore's law. Costs don't drop by 50% in 2 years
//
A new industry tends to attract plenty of hucksters. *think back to the dot com days of the 90's for example*
Since society naturally has a lack of experience with something new it makes a perfect work environment for shysters to apply his trade.
The EV car industry is in it's infancy right now, wait 10 years and there will be little to debate.
The truth will be revealed.
Everybody will know what a Li-ion EV car is capable of doing and at what cost.
So you chastise people for bringing up LifePO4s but then you cite Tesla's Lithium-Cobalt when that suits your argument. We've been through this discussion already. The Tesla Roadster batteries are crap. They were the best available at the time but compared to the modern automotive Li-Ions, they are crap.
Seriously, you are quite the Charlatan. Stop bringing up garbage that I've already debunked.
I'm just pointing out that the Nissan leaf uses lithium-manganese (LiMn2O4) batteries, not lithium iron phosphate (LiFePO4).
//
Lithium-manganese LiMN batteries
Life span = 500 cycles
the evidence *scroll down near bottom of page*
//
type 18650 LiMN battery
Cycle Life 500 cycles
more evidence *different website*
//
Ferengi Rules Of Acquisition
252. Let the buyer beware
Do you have any real engineering documentation for LiMN that is current? A passing remark on a bike kit page is not a reliable source.
If you know of a supplier selling Li-Mn batteries with a cycle life of 1,000 please go ahead and post the link.
Come on now don't be shy (I showed you mine now show me yours)!
I've already listed 4 different suppliers and they all say the same thing, only 500 cycles.
I've done my homework already, you apparently haven't.
Enerdel. A Li-MN battery actually installed in a car, not the consumer crap you keep posting.
http://www.anl.gov/techtransfer/pdf/Profile_LI_Battery_08RD_winner.pdf
Derp derp derp.
So you admit Li-Mn batteries with a cycle life of 1,000 are not for sale.
Thank you
Now lets use some *inductive reasoning* here and come up with a conclusion.
Perhaps the reason why no supplier anywhere is selling (Li-Mn batteries with a cycle life of 1,000) is because they do not exist.
WRONG. Someone brought up the 8-year warranty on the Nissan Leaf so you then brought up the Tesla batteries that are based on a completely different battery chemistry. You did exactly what you chastised others for. Hypocrisy.
And tou keep comparing random consumer-grade Chinese batteries designed for laptops with the automotive grade batteries. That is fundamentally dishonest. If they were to use those low-grade batteries then they could build the automotive battery packs for $250/KWH . . . about have the cost they are paying for the high-grade batteries that they buy.
Stop being so dishonest and/or clueless. Would you put standard grade battery in a pacemaker? No. And you don't put low-end consumer grade rechargeable batteries in an electric car.
You still haven't explained why Nissan would offer an 8 year warranty if the battery would burn out in 500 cycles. Do you think they are as dense as you are?
actually you might want to triple that price
quote from article
The wholesale cost for the batteries in the Tesla Roadster pack would be about $39K assuming a cost of $.74/Wh for Li-ion cells, which I have confirmed with a few Chinese battery suppliers as the typical wholesale pricing for Li-ion cells when purchased in volume. That's quite a sum considering it's just the batteries we are talking about here.
//
As we all know Tesla is using these laptop batteries you keep on bad mouthing as "consumer grade" Well guess what that comes out to $740/kWh
It is not your job to decided if I'm being dishonest. That's for the other forum members to decide.......who is being dishonest here (me or you)???
Look . . . he does it AGAIN! When I was pointing out your lies about consumer grade batteries, I was pointing to the **LiMN** batteries you pointed to . . . the one for the bicycle, not the Tesla.
The Tesla batteries are decent batteries . . . they have a great energy density. But they are a bad chemistry for cars because their life-cycle is crap. And the article you posted is crap. It lists one guy's GUESS as to what the batteries cost. He was wrong. Elon Musk quoted a $36,000 price for the PACK.
http://blogs.edmunds.com/greencaradvisor/2009/02/tesla-battery-pack-repl...
But a PACK is not raw battery cells. The PACK includes case, battery management system, the thermal management system.
So in other words . . . you again switch to a different battery chemistry (switched to Li-Cobalt when I was talking about the LiMN) AND you switched to talking about the PACK price not the individual cell price.
Seriously now . . . are you this clueless or are you this dishonest?
I SHOW you are dishonest by posting things that prove you to be wrong. Over and over and over again. Someone talks about one battery chemistry, then you switch up a different battery.
Someone points out the LiMN bicycle battery you bring up, then you switch to the Tesla Li-Cobalt battery. Just stop it already.
A common trick used by shysters and hucksters on the internet is to post pretty pictures with graphs and tables. The unsuspecting is easily fooled. A more level headed person can understand that manufacturing a battery to a certain specification is a far more difficult task then simply uploading a pretty picture onto the internet.
The fact that no such battery exists for sell says more than a million graphs, tables, charts, etc...
Warranties often have nothing to do with actual life expectancy; with a new application of technology life expectancy is often a best-guess. A long warranty has two advantages to the manufacturer: it attracts more sales by eliminating risk to the consumer, and the manufacturer will see close to 100% of the service complaints. The data gathered can be used to build a solid expectation of life expectancy for cost purposes, as well as to improve the product.
Toyota had a similar policy for the Prius and the battery performance was well above expectations.
Warranties often have nothing to do with actual life expectancy
No, they don't: they generally underestimate life expectancy. But *overestimating* life expectancy is a very *very* expensive mistake.
Say Nissan sells 100,000 Leafs in the next few years. If they all need battery replacements under warranty at $15K apiece, that's $1.5 billion out of Nissan's pocket. That's a good fraction of their annual profits.
So. Whose numbers are you going to trust? The people with $1.5 billion on the line if they screw up, or the random authoritative-sounding guy on the Internet?
Speaking of...
It cost Tesla $50,000 to engineer a battery pack that would last 100k mile.
Now Nissan says it can do the same at half the cost, however with a 100 mile range per charge. Something smells fishy.
Batteries don't operate on Moore's law. Costs don't drop by 50% in 2 years
They don't operate on Moore's Law, but the laws of economy of scale and early-adoption premium still hold. Like all R&D efforts, Tesla's battery development cost is amortized into every battery they make. If Nissan has similar R&D costs, the fact that they're planning to make as many Leaf batteries in a *week* as Tesla has made in its entire lifetime will bring costs waaay down. And the first time Nissan engineers disassembled a Roadster battery to see how it was made, their R&D costs were probably cut in half.
http://www.nissanusa.com/leaf-electric-car/tags/show/faqs#/leaf-electric...
Why do you ask questions you know the answer too? ---> ***it's in fine print***
A common trick used by merchants is to promise BIG numbers because it attracts attention. For example in the web hosting business a seller might advertise 100 GB (giga-bytes) of bandwidth for only $10 per month. Of course any seller delivering 100 gigs at 10 bucks would go out of business.
To keep bandwidth consumption low, a dirty dozen restrictions are placed like: no videos, chat rooms, limited number of databases, etc... It essentially becomes impossible for the buyer to consume that much bandwidth.
//
Back to the Nissan leaf. The full contract (with all the fine print) has yet to be disclosed.
253. A contract without fine print is a fool's document
Oh . . . here comes Pancake again with his garbage information again. Seriously, could you stop posting this garbage? And you post some $495 bicycle battery as your example? Really?
Do you really think Nissan would warranty their Leaf battery for 8 years if it only lasted 500 cycles?
http://www.autoblog.com/2010/07/27/nissan-announces-leaf-rollout-plans-8...
Li-Iron Phosphates last from 2000 to 5000 cycles while maintaining 80% capacity.
http://en.wikipedia.org/wiki/Lithium_iron_phosphate_battery
Oh . . . you want to look at the Leaf battery chemistry of LiMn2O4?
Enderdel makes that chemistry. They've got 2800 cycles in an EV.
http://www.anl.gov/techtransfer/pdf/Profile_LI_Battery_08RD_winner.pdf
As tested at Argonne National Labs.
Seriously . . . you are just making yourself look like a fool or a liar. Stop it.
Do you believe everything you see on TV?
Isn't there a general rule in life that says if you're uncertain about something you should get a 2nd opinion just in case.
Well I've checked 4 different sources for Li-MN and they all say the same thing
LiMN Rechargeable Lithium Battery
Cycle Life == 500 cycles
Beware, The internet is full of shysters who prey on those, with weak character, people who want to get the 2 for 1 special at half off.
No . . . and I don't believe what charlatans on the internet post either.
And you keep posting the same garbage over and over and over again.
And that is why the car companies don't use those consumer grad batteries in their cars. Duh.
I post a battery from a major american manufacturer that is publicly traded (Enerdel) that was tested by National Laboratory (Argonne National Labratories) and used in an actual electric vehicle that is currently available for sale (The Think City) . . . you post consumer-grade Chinese batteries designed for laptops and bicycles. Do you understand the difference?
Do you think any wooden house is garbage because if you built it out of balsa wood it would be weak?
Edit: No response to this one? I guess you've realized you are wrong?
Meh. Go with the Leaf. The Moose is an NEV. 25mph max speed.
http://www.greenvehicles.com/specs/moose.html
Greenvehicles has been pretty flaky. They've been promising the Triac for years. One thing that I agree with Pancake on is that the EV space has lots of hucksters & dreamers. I'd stick with the big names like Nissan & GM.
The CEO of this EV car company (now defunct "spark electric") got arrested for taking payments and failing to deliver.
It never ceases to amaze me how dumb and stupid some people can be.
Some shyster on the internet creates a website and posts a cgi image: No videos, no working prototype, not even a scale model, just a silly still image of an EV car.....and requests a downpayment to "reserve" an EV car. *smacks forehead in disbelief*
//
I agree, The nice thing about big names like Nissan and GM getting into the EV business, outright theft like this will be a thing of the past.
And I'm sure that at least a dozen other upstarts have followed the same path. The point is that we need much smaller more affordable EVs that can be charged directly with renewables, and I won't consider one until this is viable.
Well ... time to go hitch up the team to the buckboard.....giddy up!
Here's a game changer and this may as good a thread as any to post this little snippet. I call it "KSA Who?" This was sent to Gail in an email and I/we aren't trying to promote a stock or potential stock (they are private and I don't have a clue where to purchase securities at this time). Rather, I wish for Tooder's to look at a very important number.
With KSA we are talking about rate. That is the crux of PO, but still look at these numbers and the North American geo-politics around energy supply. Keep in mind the general consensus on remaining global reserves is around the 1.3 trillion barrels mark.
This is 15+ MB pdf Power Point (I know, that should be warning enough), but keep in mind Canadians tend to be conservative and understated like the Norwegians when it comes to this kind of stuff.
http://www.choa.ab.ca/documents/Mar28DM-ppt.pdf
Go to slide 15 of 38. 1.67 trillion barrels. Even if they could deliver on half that number, is that not a game changer??
It doesn't do anything towards alleviating PO, but it does tend to change the focus a little...
EE, interesting presentation - looks like a (profitable) scheme designed to make work for EE's !!
They can use all the electricity generated by the SAGD folks that they can't transmit out of Ft. Mc!
Have been trying to email you - is the email in your profile no longer working?
Paul.
Paul,
Actually, it implies a lot of work for Civils. Most of the work around renewable energy generation is civil and only 10-15% electrical. The same could be said for transmission lines too, except the ratio is more 20-25% electrical. There is a plan in place to supply the electricity with wind and hydro.
This has a few important implications, the major one being no longer using tailings ponds for post extraction and processing.
I highly doubt the Oil Sands will get over 5 mbbpd in the near term even with this technology. This just makes the post PO landing a little softer though. Although, now they're going to have to import camels into Alberta...
email: bentnail[at]tobianoliving[dot]ca
This is uch more to this than meets the eye. The two refineries that were to process the Manifa field crude in Saudi Arabia were the "new Ras Tanura" east coastt refinery and the Saudi Aramco Conoco Phllips refinery in Yanbu. Both were forecast to process 400 kb/d of heavy sour crude. The projects were cancelled earlier this year for reasons not too clear but cost and complexity was among the factors as well as political dimensions. A new refinery project was planned for Jizan in the south west but this has gone quiet of late and was to be a much smaller project of 250 kb/d capacity, and with no petrochemical complex.
The real rub comes with the soaring Saudi oil demand. Last year Saudi oil consumption grew by nearly 10% (Kuwait the same)with a lot of the oil being used for power and water production as direct burning in the power/ desal plants. The Saudi gas situation is so acute that increasingly large volumes of crude oil are being diverted into the power and water sector. Much as Matt Simmons predicted the Saudi Gas initiative has been a failure. The result is that crude is being burned at the equivalent value of $0.75 million BTU or $37/mt about $5.3 per barrel.
Projecting Saudi demand and production forward suggests a surprise in short time. Sadui Arabia is committing production the joint venture projects in Asia which will reduce the amount of free oil for export. Add this to the growing internal demand and oil exports look bleak which is bad news for the OECD. Saudia Arabia claims to have a productive capacity of 12.5 million b/d. We will only know if this is possible when it is put to the test. Moreover we have no idea how long that this can be sustained. New oil producing projects in SA are limited, and any growth in production will need massive investment in the oil infrastructure.
Meanwhile the saudi population continues to grow and growth in energy demand grows even faster - an entitled population.
Refinery construction isn't that profitable if oil production is going to peak soon. To handle cheap sour crude it's easier to front-end an existing refinery with the kit to split off the heavy ends, and feed those to new equipment installed to handle it. When oil companies realized the world economy was cratering in 2008, refinery projects were put on hold. I suspect they'll stay on hold because the most efficient way to increase capacity is to build it in existing refineries.
The exception may be China, India, and others where consumption is increasing a lot. Building extra capacity in Saudi Arabia doesn't seem to be a sensible investment. They should spend on birth control education and start figuring out where they'll get their natural gas in the future.